New facility will employ more than 1,500

200 jobs also to be added at Round Lake manufacturing center

April 20, 2012|By Peter Frost, Chicago Tribune reporter

Deerfield-based Baxter International Inc. it will spend about $1 billion on a production center near Atlanta to meet growing demand for its plasma-based treatments for immune disorders, trauma and other conditions. Construction will begin this year, and the plant is expected to start production in 2018. (Tim Boyle, Getty Images)

Seeking to meet growing demand for its plasma-based treatments for immune disorders, trauma and other conditions, Baxter International Inc. said Thursday that it plans to spend up to $1 billion during the next five years to open a new production center near Atlanta that will employ more than 1,500 workers.

Baxter said construction will begin this year, and the plant is expected to start production in 2018. As part of the announcement, the Deerfield-based medical products company said it plans to add more than 200 jobs at a manufacturing center in Round Lake to support increased production of Flexbumin, its plasma-based treatment used for patients suffering from shock, blood loss or severe burns.

The Covington, Ga., facility will be capable of producing about 3 million liters of plasma-based treatments, with the ability to expand in the future if necessary, said Baxter Chairman and Chief Executive Robert Parkinson Jr. in a morning call with analysts.

"The announcement represents our confidence in the long-term global growth of our protein business," he said.

While some Wall Street analysts questioned whether the company's $1 billion investment is justified by the amount of additional capacity it will produce, Baxter said the facility will be configured in a way that will allow future expansion at a lower marginal cost.

The expansion was widely expected by investors, said David Roman, an analyst at Goldman Sachs.

"The plan is critically important to supporting (Baxter's) long-term growth," Roman said. Without an expansion, the company was in danger of running out of capacity to produce a range of popular treatments, he said.

Baxter also reported Thursday first-quarter income that beat expectations, rising 3.2 percent, to $588 million, or $1.04 a share, driven by strength in its treatments for hemophilia and immune-deficiency disorders. That was up from $570 million, or 98 cents a share, in the year-ago period.

Revenue for the quarter was $3.34 billion, up 3.2 percent from the year-earlier period. Excluding the effect of foreign currency exchange, revenue grew 4 percent.

Parkinson and other Baxter executives also acknowledged that they were caught off guard by the Food and Drug Administration's decision to request more information about the long-term use of a treatment for patients with a condition called primary immunodeficiency.

Baxter warned Monday that the FDA's request could delay the approval of the product, called HyQ, beyond 2012.

Among the dozens of products in Baxter's drug pipeline, HyQ was the treatment investors expected to have the best near-term chance of boosting the company's results. The company had projected HyQ to be approved this year and generate sales between $100 million and $200 million by 2014.

On news of the delay, investors sent shares of the company's stock down nearly 7 percent Monday, frustrating Parkinson.

"With a company our size, there is just a total disconnect" between the delay of HyQ and the reaction of the market, Parkinson said.

While Baxter declined to provide a new timeline for the approval and release of HyQ, the company's chief science and innovation officer, Norbert Riedel, said researchers have collected three years' worth of clinical trial data on the majority of patients enrolled in the final round of studies for the treatment. Baxter's initial application to the FDA provided only one year of clinical trial information.

Roman, who projects that HyQ's launch will be pushed to 2014, said the length of the delay is contingent on how much information the FDA requests.

The best-case scenario is that the FDA asks Baxter to incorporate its already-collected three-year data into the original filing and conduct an additional study that follows patients for five years, Roman said. If that happens, the treatment could be approved in early 2013.

But if the FDA mandates new clinical trials, "it could be a long time before that product comes to market," Roman said.